SIC 4225 General Warehousing and Storage

 
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SIC 4225

This category includes establishments primarily engaged in the warehousing and storage of a general line of goods. The warehousing of goods at foreign trade zones is discussed under SIC 4226: Special Warehousing and Storage, Not Elsewhere Classified. Field warehousing is found under SIC 7389: Business Services, Not Elsewhere Classified.

NAICS CODE(S)

493110

General Warehousing and Storage Facilities

531130

Miniwarehouses and Self-storage Units

INDUSTRY SNAPSHOT

In the mid-2000s there were over 12,000 warehouse establishments operating in the United States. The trend was toward providing additional "value-added" services besides storage, including kitting services (grouping individual items together for shipment), labeling, and returns management. As such, many warehouses became providers of logistics services. According to the research firm Armstrong & Associates, in 2004 there were 76 third-party logistics providers in the United States who operated 3,972 warehouses with a total of 477 million square feet. The U.S. commercial warehouse industry was valued at an estimated $25.7 billion. General warehousing generated approximately 65 percent of revenues; specialized goods warehousing, 14 percent; refrigerated storage, 10 percent; farm products, 6 percent; and household goods, 6 percent.

Operating between shippers and carriers, companies engaged in the general warehousing business were third parties in the transportation industry. These businesses provide a variety of transportation and distribution services in addition to storage. As the industry entered the new millennium, large general warehousing companies offered value-added services ranging from customer billing to salvage and scrap disposal, and were marketing themselves as logistics services providers rather than as storage companies. Logistics, a term the transportation industry borrowed from the military, refers to all phases of the distribution process. Logistics-related services were provided by various industries including public warehouses, parcel express, and freight transport.

The miniwarehouse and self-storage sector was highly diversified, with a several national and regional chains such as Amerco's U-Haul Storage, Public Storage, Inc., Shurgard Storage Centers, Inc., and Storage USA. According to the Self-storage Association, which represents more than 2,750 member companies, the U.S. self-storage industry generates $15 billion in revenues and has more than 46,880 self-storage facilities across the nation.

ORGANIZATION AND STRUCTURE

General warehousing companies received and shipped goods on behalf of their customers, serving as middlemen in the transportation process and a vital part of the logistics business. Although some of the large general warehousing companies operated their own trucking fleets, normally an independent carrier was used to transport the goods. The carrier was chosen either by the customer or by the warehouse operator who then acted as the customer's agent.

Like most transportation-related businesses, the general warehouse industry was well organized on a national level. Four trade associations, Affiliated Warehouse Companies, Allied Distribution, American Chain of Warehouses, and American Warehouse Association, founded in 1953, 1933, 1911, and 1891, respectively, maintained national networks for marketing, sales, and industry lobbying. Because this industry operated between the vast manufacturing industry and the powerful transport industry, national organization was critical to the preservation of its own interests.

Competitive Structure

Although a few multiregional companies dominated the general warehousing business, dozens of medium and small companies operated throughout the country. Entry into this industry was relatively easy for businesses proposing to operate locally; expanding demand and low start-up costs encouraged new entrants. In fact, from 1988 to 1993 the number of firms in the industry nearly tripled. In the mid-1990s warehouse expenditures declined due to lowered costs of data processing equipment, furniture, and overhead labor. Self-storage companies found the conditions particularly inviting. Public and contract warehouse operators involved in logistics, however, faced an increasingly competitive environment in which service and technology were critical to success.

Although expanding demand and relatively low barriers to entry encouraged new entrants, competition for national market share was strong. Once a shipper chose a warehouse operator, especially one that offered logistics support, a strong relationship developed, and the cost of switching to another warehouse operator was high. Expanding market share, therefore, was difficult. The largest firms faced competition from national trucking companies and specialized distribution services in the logistics sector. In the warehouse sector, these companies competed with manufacturers' in-house storage operations. To gain market share, the national operators invested heavily in technology to differentiate their services.

BACKGROUND AND DEVELOPMENT

General warehouses have operated in the United States since colonial days. Located in major ports such as Boston, these early warehouses were used as repositories for goods being shipped to and from England. These warehouses served as temporary housing for the exports of raw materials, such as cotton, and imports such as finished goods like textiles.

It was not until the completion of the railroad trunk lines around 1860 that warehouses began to move from the port cities into the nation's interior. During this time, industry was developing in the northeastern states, and the western farmlands were producing corn and wheat for consumption in the east and for export.

General warehouses grew with the nation's economy. As production techniques became more efficient, finished goods were produced faster, allowing manufacturers to develop inventories that required storage. Manufacturers that could not afford to maintain a warehouse paid a public warehouse operator to store finished products and raw materials. Often, manufacturers would ship their products to and from warehouses at major railroad terminals.

From its inception, the primary function of the general warehouse industry was storage...

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